Smokers boost treasury coffers by £14.7bn

Smokers make a considerable contribution to the public purse, finds a report by the Institute of Economic Affairs, with the costs of treating smoking-related diseases more than compensated by tobacco duty and pension savings.

The research group shows smokers provide a net saving of £14.7bn to the Treasury coffers every year. While the government spends £3.6bn treating smoking-related diseases and £1bn collecting cigarette butts and extinguishing smoking-related house fires, it saves £9.8bn annually in pension, healthcare and other benefit payments because smokers tend to die prematurely.

Smokers also contribute £9.5bn in tobacco duties a year. The group estimates 15.9% of deaths in the UK (96,045) were attributable to smoking in 2015 and each individual lost 13.3 years of life on average.

This paper is the final instalment of a three-part series looking at three lifestyle factors thought to be a drain on taxpayers. The first two papers looked at alcohol and obesity respectively. The costs of alcohol are also more than offset by alcohol duty revenues. Obesity incurs an annual net cost of up to £2.5bn. Taken together, Britain’s public finances would be £22.8bn worse off if there were no drinking, smoking or obesity.

While you may be doing government finances a favour, giving up smoking is one of the best ways to reshape your finances. At over £10 a packet, a 20-a-day habit can cost £300 a month. If you put £150 into your pension pot, you’d have a pot of over £60,000 after 20 years (assuming a 5% growth rate). You’d also have £1,800 a year to spend on a holiday.

Cherry has worked for a range of national, consumer and trade titles including the Financial Times, Telegraph, Investors Chronicle and Money Observer. She has co-authored a book on investing in emerging markets and is a multiple winner of the Investment Management Association and Association of Investment Companies freelance journalist of the year award..